Wednesday, 15 August 2012

A fractional decline in the VIX today. The daily cycle is suggesting downside momentum is beginning to wane. A new up cycle is well overdue.

VIX'60min

VIX, dailly

Summary

The underlying MACD (blue bar histogram) cycle is suggesting a new up wave is due, but it really might not amount to much. If we can't even break into the 17s, then those looking for VIX 12...even 10, will have a chance by early September.

However, what remains clear, for those buying long dated VIX calls at these levels, there sure is an awful lot of upside potential.

I'm getting real tired of this. Its day'8 in a trading range of just 20pts on the sp'500 index.

dow'60min

sp,daily5

Summary

Both the hourly and daily charts are clear. In price terms we are flat lining. Underlying momentum (see MACD) continues to weaken. At current rate of decline we'll get a bearish MACD cross next Monday.

Market remains very minor chop. The daily cycle continues to lose upside momentum, and some sort of weakness should be seen increasingly through the rest of today.

dow'60min

VIX, daily, rainbow

Summary

If we break the lower channel line, we should start to see some significant declines by the close.

Look for dow -45/60pts. If we see that sometime today, it should be indicative of a major turn underway.

Regardless, stop levels for anyone wanting to take new positions are VERY clear, since we've been in such a tight trading range for the last 8 days.
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VIX remains largely flat, nothing notable yet. Yet, we do have two blue candles on the rainbow chart...a turn is being indicated.

Good morning. Futures are a little lower, sp -3pts, we're set to open around the 1400 level.

*Empire manufacturing survey, -5.85 vs +7.0 consensus. Ugly !

sp'daily5b

Summary

Bears really need a close in the 1380s today. That would make for a good initial decline. Even though its opex this Friday, it looks like we'll be falling into opex, rather than trade sideways. We've been stuck in a 20pt trading range for 7 days, I can't see it lasting much longer!

So, look for a close in the 1380s, and VIX in the low 16s.

*we have industrial production and housing data to come at 9.15am and 10am respectively.

Oil was a touch higher today, but remains below the ultimate psychological level of $100. All those who are on the 'US slipping into a recession in Q3/4' waggon, should be wanting to see lower oil prices as a sign of underlying weakness in the global economy.

WTIC, weekly

Summary

We have a clear bear flag on the weekly cycle, although in price terms, its to be dismissed if we put in a few closes over $100. Indeed, the bears should want to see prices level out here, with an attempt to break the flag no later than mid September.

First target would be $85, that should confirm the flag, and open up a test of the recent low of 77.28.

If we can break into the low 70s...that should allow $60 across a number of months. That could take until late spring 2013 though.

An unreliable commodity

Oil remains a real wild card though. Not only is the price rigged by the cartel of OPEC, and greatly affected by basic demand/supply aspects, there is also the never ending chatter of 'imminent middle east conflict' that often sends prices higher.

One final thing, is the issue of further QE. How can the Bernanke (or his successor - if Romney wins) do QE with Oil already close to $100 ? Oil back over $125/140 would be a very serious problem for the struggling western economies. I would guess, the Fed would be more than happy to launch new QE with Oil in the low 60s. Who would complain then?

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I (Permabear Doomster) am not a financial advisor as officially endorsed by any national government, corporation, financial/securities regulatory authority in neither the USA, UK, or any part of the world. None of the posts/comments in these pages are intended as trading/investment advice. They are merely my opinion on where a given market/stock and any other 'instrument, index, etc' may move at any future time.